OFWs in Brunei seen to benefit from double tax avoidance pact: BIR

Arra Perez, ABS-CBN News

Posted at Apr 25 2023 07:23 PM

MANILA — Filipinos who work in Brunei, along with Filipino businesses and companies located in the country, will enjoy the benefits of the Double Taxation Avoidance (DTA) Agreement signed by the two countries.

Consorcio Olivan from the Bureau of Internal Revenue's (BIR) Rulings and Mutual Agreement Procedures (MAP) Section said Tuesday professors, teachers, and researchers working in Brunei are exempted from paying their income taxes for a period of four years.

"Article 21 of the treaty says that teachers working in Brunei are exempt there for a period of four years. Usually we only give exemption for two years. But, based on the generosity of our Brunei counterpart, they give a longer period of exemption," he explained.

This was during the panel discussion of the Senate Committee on Foreign Relations on whether or not the Senate should concur in the Philippines' agreement with the government of Brunei for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income from cross-border transactions.

Olivan added that other Filipino professionals and income owners will also be exempted from income taxes "if their stay in Brunei is not more than 183 days."

"But if they exceed that 183-day threshold, then they will already be taxed in Brunei. Same thing here if an expatriate happens to work here for more than 183 days, that person is already taxable here," he shared.

"Under the treaty, we have this concept of permanent establishment. So it's defined as a fixed way of business, such as a branch or an office. If you happen to set up an office or a branch in the Philippines and if you're a foreign company, then you are already taxed here. But if it so happens that you only provide the services here for not more than 183 days, then we will not tax you," he added.

Committee chairperson Sen. Imee Marcos asked the BIR to clarify the terms used in the treaty to avoid tax fraud.

"Utilized in the treaty is 'tax payable'. They're not using the term 'tax already paid' or 'certified as paid' or 'verified by the other taxing authorities'. Ang sabi lang, tax payable," she explained.

BIR, for its part, assured it will "revisit" and "update" the Philippine treaty model.

Sen. Sherwin Gatchalian also asked BIR to assess other existing double taxation treaties with other countries.

"What benefits are we deriving as a country, how much are those benefits in terms of enforcement. How much are we collecting because of enforcements. So it's good to analyze one by one so that we can quantify. Hindi lang tayo pasok nang pasok sa treaty," he said.

The Philippines and Brunei signed the DTA Agreement on July 16, 2021.

According to data from the Legislative Research Service, it is one of 44 countries that the Philippines has inked a DTA Agreement with, including Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Kuwait, Malaysia, Mexico, The Netherlands, New Zealand, Nigeria, Norway, Pakistan, Poland, Qatar, Romania, Russian Federation, Singapore, Sri Lanka, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, and Vietnam.